Tuesday, December 07, 2010

Today's Headlines

Posted by Gary .....at 2:09 PM

Bloomberg:
  • Tax Cuts May Fuel Economy, Limit Need to Extend Fed Purchases. President Barack Obama’s agreement to extend Bush-era income-tax cuts may give U.S. economic growth a boost while reducing pressure on the Federal Reserve to prolong its $600 billion bond-purchase program. Obama’s deal with congressional Republicans may raise gross domestic product next year by as much as half a percentage point to about 3.1 percent, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Allen Sinai, chief global economist at Decision Economics in New York, also raised his growth forecast for next year by half a point, to a range of 2.75 percent to 3 percent. Stocks rallied after the agreement was announced, sending the Standard & Poor’s 500 Index to the highest level since the financial crisis in September 2008 on expectations that the extension of Bush-era tax rates, as well as reduction in payroll taxes, would spur the consumer spending that accounts for 70 percent of the world’s largest economy. “It bumps up consumer spending in the first half of next year,” Feroli said. “You’re going to have a pretty nice increase in disposable income.” Much of the increase would come from a 2 percent cut in payroll taxes -- which fund Social Security and Medicare -- that “we weren’t expecting,” he said. The payroll-tax cut would apply to all wage earners, an administration official told reporters on a conference call yesterday. That would be an $800 savings for individuals with an income of $40,000. Those who earn salaries of more than $106,800 would save a maximum of $2,136.
  • Credit-Default Swaps Tumble to One-Month Low on Obama Tax Cuts. The cost of protecting U.S. corporate bonds from default fell for a fifth day and to the lowest in a month after President Barack Obama agreed to extend tax cuts. “The market much prefers certainty to uncertainty,” Brian Yelvington, head of fixed-income research at Knight Libertas LLC in Greenwich, Connecticut wrote in an e-mailed note. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decreased 2.9 basis points to a mid-price of 87.7 basis points as of 8:22 a.m. in New York, according to index administrator Markit Group Ltd.
  • ECB Said to Be Buying Irish, Portuguese, Greek Government Securities Today. The European Central Bank bought Irish and Portuguese government bonds today, according to at least two people with knowledge of the transactions. Central banks were also buying Greek debt, said one of the people, who asked not to be identified because the deals are confidential. Irish 10-year bonds rose, sending the yield down nine basis points to 8.28 percent as of 12:27 p.m. in London.
  • Junk Bond Defaults Fell to 3.3% in November, to Drop Further, Moody's Says. The global speculative-grade default rate fell to a two-year low of 3.3 percent last month at Moody’s Investors Service, as junk-rated borrowers tapped the bond market at a record pace. The rate declined from 3.7 percent in October and 13.6 percent a year ago, Moody’s said in a report today. Defaults will fall to 2.9 percent by year-end and 1.8 percent by November 2011, according to the report. That compares with a forecast last month of 2.8 percent by year-end and 1.9 percent by October 2011.
  • Middle East Supertanker Excess Expands, Curbing Potential Rates Advance. A surplus of supertankers competing to collect 2 million-barrel cargoes of Middle East oil expanded, curbing the potential for rates to rally as Northern Hemisphere refineries seek more crude to meet winter demand. There are 23 percent more very large crude carriers, or VLCCs, for hire over the next four weeks than there are cargoes, according to the median estimate of six shipowners and brokers surveyed by Bloomberg News. The surplus was 18 percent for the past two weeks.
  • First Exchange-Traded Funds Backed by Industrial Metals Will Start Dec. 10. ETF Securities Ltd., whose managers started the world’s first gold-backed exchange-traded product, said it will list similar funds holding copper, nickel and tin on the London Stock Exchange on Dec. 10. Other ETPs backed by aluminum, lead and zinc will be introduced next year, the Jersey, Channel Islands-based company said in an e-mailed statement today. The first three funds will be denominated in dollars and carry a management expense ratio of 0.69 percent, it said. A seventh fund will track all six metals. “They give investors, for the first time, direct access to the physical metals market,” ETF Securities Chairman Graham Tuckwell said in the statement.
  • China, India, Brazil Push U.S. for Deeper Greenhouse Gas Cuts. China, India, Brazil and South Africa said the U.S. must pledge deeper cuts in greenhouse gas emissions to help make progress in United Nations climate talks, sharpening divisions between rich and poor countries on how to combat global warming. The four developing nations at the talks in Cancun, Mexico, also called on industrialized economies to provide more aid for countries seeking to clean up their energy industries, adding to demands that the U.S. and European Union said may wreck the meeting.
  • Iran Agrees to More Nuclear Talks, Won't Suspend Enrichment. Iran agreed to more talks on its nuclear program while saying it would “absolutely not” suspend uranium enrichment, marking the first time in a more than a year that diplomatic options for the dispute are being kept alive.
  • Onyx(ONXX) Drug Reduced Cancer in a Third of Patients With Myeloma in New Study. Onyx Pharmaceuticals Inc.’s experimental drug carfilzomib shrank the tumors of one-third of study patients with multiple myeloma, a deadly blood cancer. The company’s shares surged the most in four months in New York trading. The company rose $3.91, or 13 percent, to $33.25 in Nasdaq Stock Market trading at 9:44 a.m.
  • Christie Says Goal Is To Erase New Jersey Budget Gap by End of First Term. New Jersey Governor Chris Christie said his goal is to erase the state’s chronic budget deficits by the end of his first term. Christie, a Republican who took office in January, spoke to Bloomberg News after a speech to business leaders in Newark that was closed to the press.
  • Tax-Cut Extension Will Fuel U.S. Growth, Pimco's El-Erian Says: Tom Keene. Pacific Investment Management Co.’s Mohamed El-Erian said that the U.S. tax agreement worked out by the Obama administration is good for growth as reflected in gains in stocks and commodities and declines in bonds. “It puts pressure on the fiscal situation so bonds are selling off,” El-Erian, chief executive and co-chief investment officer of the firm that runs the world’s biggest bond fund, said in an interview on “Bloomberg Surveillance” with Tom Keene. “It is very important that the market is interpreting it as good for growth, so risk assets are rallying across the board.”

Wall Street Journal:
  • Hedge Funds Post $16 Billion Inflow in Oct., Heaviest Since Nov. 2009. Hedge funds hauled in $16 billion in October, marking the heaviest inflow the industry saw since November 2009, according to alternative investment data provider BarclayHedge.
  • 18 Countries Join China in Nobel Boycott. China and 18 other countries have declined to attend this year's Nobel Peace Prize ceremony honoring imprisoned Chinese dissident Liu Xiaobo, Nobel officials said Tuesday. China has unleashed a new barrage deriding the decision, with Chinese officials in Beijing called Liu's backers "clowns" in an anti-Chinese farce — comments that came only three days before the Dec. 10 Nobel peace prize ceremony in Oslo. Beijing considers Liu's recognition an attack on China's political and legal system, and says the country's policies will not be swayed by outside forces in what it calls "flagrant interference in China's sovereignty."
  • Julian Assange Denied Bail After Arrest. WikiLeaks founder Julian Assange was denied bail at a court hearing following his arrest in the U.K. early Tuesday on an international warrant related to sexual-assault allegations in Sweden.
CNBC:
  • Job Openings Rise Sharply to a Two Year High. Employers posted a sharp increase in job openings in October, raising hopes that hiring could pick up in the coming months. Businesses and government advertised nearly 3.4 million jobs at the end of October, up about 12 percent from the previous month, the Labor Department said Tuesday.
  • Payroll Tax Cut Signals Big Obama Shift to Supply Side. Wall Street cheered President Obama’s fiscal compromise with Republicans, not just the extension of the existing Bush-era tax cuts, but the addition of a payroll tax cut in particular as that measure may signal an even bigger shift on the part of the White House toward supply-side economics.
Business Insider:
Zero Hedge:
New York Times:
  • Banks May Face Rating Cuts, Analyst Says. One of Wall Street’s most influential securities analysts is telling investors to brace themselves: some of the nation’s biggest banks could be on the cusp of a credit rating downgrade. In a new report, Glenn Schorr, who covers brokerage firms and banks at Nomura, says that while “it’s not a done deal, at present, Bank of America(BAC), Citigroup(C) and Morgan Stanley(MS) appear most at risk of being downgraded to Tier 2 status.”
HedgeCo.Net:
Apple Insider:
  • Apple(AAPL) Struggles to Meet iPhone 4, iPad, MacBook Air Demand in China. Apple's hottest products are facing significant demand in China, with the 11-inch MacBook Air, certain versions of the iPad, and the iPhone 4 all facing shortages. Analyst Brian White with Ticonderoga Securities is continuing his tour of the Far East, and on Monday provided investors an update on his second day in China. Though he noted the iPad and 11-inch MacBook Air, in particular he found the iPhone 4 to be Apple's most difficult product to purchase. He said wait times are around two months and carrier China Unicom is unable to fulfill about a third of preorders. "Most of the carriers agree that the high-end smartphone opportunity in China is approximately 100-125 million subscribers, which we view as the addressable market for the iPhone," White wrote.
Real Clear Politics:
  • Will the Next President & Congress Rescue Us From ObamaCare? Paul Krugman, Nobel Prize winner in economics and an influential New York Times columnist, also has a blog, "The Conscience of a Liberal." On ABC's This Week (Nov. 14), during a discussion on balancing the federal budget against alarming deficits, he proclaimed the way to solve this problem is through deeply cost-effective health care rationing. "Some years down the pike," he said, "we're going to get the real solution, which is going to be a combination of death panels and sales taxes." That would mean the U.S. Debt Reduction Commission "should have endorsed the panel that was part of the [Obama] health care reform."
Politico:
  • Democratic Leaders Rip Tax Deal. Democratic leaders in the House are openly rebelling against President Barack Obama’s deal with Republicans on the Bush-era tax cuts — further isolating the president from Democrats who carried his agenda for the first two years of his presidency. House Majority Leader Steny Hoyer (D-Md.) said Tuesday that Democrats didn’t reach a deal with the White House, adding that his party believes it is “not appropriate” to extend tax cuts for upper-income Americans “when the deficit is at unacceptable levels.” “There was, at that point in time, no consensus or agreement reached by the House leadership,” Hoyer said. “There was a discussion it took some time, but there was no agreement reached.”
AP:
  • More Auto Loans Going to Subprime Buyers. Consumers with less than stellar credit are getting car loans again as lenders loosen their standards, and the trend is likely to continue as more lenders get into the business. The percentage of loans going to subprime buyers rose 8 percent in the third quarter, their first year-over-year increase since 2007, according to a report issued Tuesday by Experian, a credit reporting agency. For new cars, the percentage of loans going to subprime buyers rose 13 percent over the July-September period in 2009. The increase for used cars was 3 percent.
Arabian Business:

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